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Nice infographic. What’s it mean?

Hi there, folks! We’ve been working hard on the 2017 version of our state solar power rankings report, and we’re ready to dish some data! We thought the information about the investment returns of solar power deserved to escape our sealed envelope before the rest of the report was ready for publishing.

What you see in the graphic up there are bars representing the potential returns on a solar investment for all 50 states and the District of Columbia. The bars reach closer to the center of the sun as the investment return percentage goes up. Every state is graded A-F on their investment return, and bars that signify A and B grades are burnin’ hot!

But solar even meets the 7% threshold in places you wouldn’t expect, like Wisconsin and Minnesota. That’s the big, shocking news we hope the infographic conveys in a compelling way.

How we calculate Investment return for solar

There are a ton of variables that go into calculating the numbers you see above. Basically, it boils down to costs and income (energy savings and incentive payments). We plot those numbers on a graph for 25 years (the length of major panel manufacturer’s warranties), and do the math to find the payback time, Internal Rate of Return, and Net Present Value.

For 2017, we added a new variable called panel degradation. Solar panels don’t last forever, but that warranty means the manufacturers guarantee their panels will continue to function at better that 80% of their rated production after 25 years. That’s a loss of about 0.7% of output per year. Some manufacturers now report better-than-expected degradation rates of less than 0.5%, but until the lengths of those warranties increase, we’re sticking with 0.7%.

Paying for electricity from the utility company gets more expensive each year by an average of 3.5%. That means electricity bill savings get larger every year, even as the panels produce slightly less electricity. SREC payments vary widely by state, but generally last a few years after installation. State solar tax credits often have per-year caps that mean you only get a certain amount until your full credit has been claimed.

Here’s how that looks in a chart of the cumulative returns over 25 years:

Once we put all of that together, we find the “Internal Rate of Return,” or IRR, a tool used by businesses to determine the best ways of investing their money. The IRR is the interest rate you would have to get to equal the return this investment provides.

According to our calculations, the average IRR of a solar investment in the US as of 2017 is 9.24%. Better than the stock market! For reference, the IRR in the Connecticut chart above is 17.7%, which is like “whoa, crazy” good.

But this is just the beginning. We do these kinds of calculations for all 50 states, so head over to our home page and click your state for more info!

My team is representing Solar power in the Chicago Polar Plunge in March 2017. I hope you will come and hand out literature about solar panels and saving money. The team I put together is The Solar Polar. I have already registered my team. I personally want solar panel roofing for my house. It would be the first one in my town if I do! Contact me if you want to be represented and sponsor us.

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Solar Power Rocks provides free comprehensive guides to solar policy and incentives for all 50 states and the District of Columbia, along with hundreds of helpful and informative articles about recent solar news and general information related to home solar power. For media inquiries, general questions, or to report an error, you can reach us here.